Atari Teenage Riot: The Inside Story Of Pong And The Video Game Industry's Big Bang

On Nov. 29, 1972, a crude table-tennis arcade game in a garish orange cabinet was delivered to bars and pizza parlors around California, and a multi-billion-dollar industry was born. Here's how that happened, direct from the freaks and geeks who invented a culture and paved the way for today's tech moguls.

Today, Rooster T. Feathers Comedy Club at 157 West El Camino Real in Sunnyvale, California — slap-bang in the middle of Silicon Valley — faces out to a Chinese restaurant and taqueria across a three-lane road. It’s squeezed between a Goodyear garage and a check-cashing place; on the corner is the California Paint Company. Drive down Route 82, head onto Sunnyvale Saratoga Road, and three or so miles down the street you’re at the Apple campus in Cupertino. In the fall of 1972, Rooster T. Feathers was Andy Capp’s Tavern. “Just a dive bar, nothing special,” says the club’s manager, Beth Schumann. But this dive bar would soon become the video game industry's Plymouth Rock, Mount Sinai, and Cheers, all rolled into one.

This was where Pong— a rudimentary Ping-Pong game featuring two dashes for paddles and a white dot as a ball — became a phenomenon. But its creation was practically an accident, a stroke of luck borne out of failure. The video game industry didn’t really exist, and what its pioneers did “was very seat-of-the-pants stuff,” says Darran Jones, editor of Retro Gamer magazine. “People were making things up as they went along.”

The frontage in 1972 was much the same as it is in 2012 — though Schumann says the building has had a couple of paint jobs since. Inside was a little different: Drinkers walking into Andy Capp's that summer of '72 were presented with beer on tap, pinball machines, a purple-glowing jukebox playing vinyl 45s, and an arcade machine — the world’s first commercially available one — called Computer Space, which let players take the helm of a tiny pixelated rocket ship and try to shoot flying saucers out of the sky. But the game was a tough sell.

“I think for that stage in the life of a coin-op game, it was too difficult,” says its co-creator Nolan Bushnell, 69, pausing between sentences at his home in Los Angeles to take swigs of a drink to ease his hoarse throat. Still, the game racked up $3 million in sales from a couple thousand units. “I wasn’t disappointed with Computer Space’s performance. The idea of doing $3 million in sales was kind of cool.” But a better, more user-friendly game could make more, he thought, if customers kept returning to play.

That better game would be Pong, which was deceptively simple to pick up, but infuriatingly difficult to master (not least because a developmental hiccup meant that your paddle couldn’t defend all your territory in the original coin-operated version). Today it is considered one of the biggest arcade games in the world, responsible for the success of the video game industry, valued at $78.5 billion this year. Pong took video games out of windowless computer labs full of buttoned-up coders and brought it to the masses, and with it, Bushnell's nascent company, Atari.

It would've been hard to imagine then, but games today are bigger than the global film industry, which had a 60-year head start. Pong is the reason that Call of Duty: Modern Warfare 3 can make more than three times as much in its first five days on sale as The Avengers can in its first five days in theaters. But while today’s blockbuster games are largely created by hundred-strong teams at bankrolled developers, the men who created and crafted Pong embodied the bootstrap start-up culture that typifies the most exciting edges of today’s tech landscape. They were knocked back by old men in drab suits who said games weren’t going to be big business. But games were going to be big business, even those started in unassuming surroundings. And nothing was going to stop them.

“Nolan Bushnell's personality established an important paradigm for Silicon Valley entrepreneurs: willful, daring, imaginative, hypercompetitive,” says Henry Lowood, curator of the history of science and technology collection and media collection at Stanford. “It's difficult to imagine Steve Jobs without Bushnell before him.”

But before these culture-defining pioneers could establish a paradigm, they had to first be very bored.

In 1969, Bushnell and Ted Dabney, now 75, set up a company, at the time called Syzygy, named for the phenomenon in which the earth, sun, and moon fall in line during an eclipse, to create Computer Space, with $500 placed in Dabney’s bank account. They had met one year earlier, thrown together in a small shared office at Ampex, one of the biggest engineering firms at the time, based in Redwood City, California.

Space in the office was tight, especially when Bushnell, who had reached 6 feet 4 inches by the seventh grade, stretched out his legs. In 1969, Ampex created and maintained the Videofile system, which recorded files and photos to a magnetic videotape system long before the advent of commercial computer hard drives (to this day, Britain’s New Scotland Yard still uses the Videofile system to store perpetrators’ fingerprints).

Bushnell made $12,000 a year as a research design engineer and enjoyed the job, but had long nurtured the idea of a video game arcade — a dream first fostered working summers at the Lagoon, an amusement park north of Salt Lake City. The park, according to a mention in the Beach Boys’ 1965 album filler, “Salt Lake City,” was “full of all kinds of girls/and rides, and we'll be flyin’ there soon, now.” (The lyrics were more likely Mike Love’s doing than Brian Wilson’s). But full of arcade machines it was not — at least yet. “There was pinball, knocking down bottles to win a stuffed animal, things like that,” Bushnell says dismissively. “I knew at the age of 22 that if there was a video game there, it’d earn a lot of money.”

There were such things as video games, but in a form totally unrecognizable today. Bored computer engineers and military polymaths used spare computer time and processing power to code rudimentary games, but they were purely for their own entertainment. To get near them you needed privileged access to a computer lab at a high-ranking university — or the gumption to worm your way into one.

Bushnell spent most of 1964 and 1965 in the lab at the University of Utah, playing a program called Spacewar!, an intergalactic battle game written by MIT student Steve Russell in 1962. I ask Bushnell if he encountered the game through a school computer club. “Not at all,” he says. “It was a fraternity brother and myself sneaking into the lab late at night.” Spacewar! stuck with Bushnell: With a few tweaks, and placed inside a coin-operated arcade cabinet, it became Computer Space.

In spite of the cramped Ampex office, Bushnell and Dabney became close when Bushnell asked Dabney to learn the Japanese board game Go so he would have a playing partner. “We’d only play at lunch,” Bushnell says — the idea of goofing off during the day was anathema to him. The duo graduated from a cheap and flimsy board to one handcrafted from a $6 offcut.

"I carved it out of an inch-and-a-half-thick board and put a Videofile logo on the other side so it could hang on the wall," Dabney recalls. When the two played, the board sat on top of a trash can, a coincidental foreshadowing of the future: The original Pong prototype in Andy Capp’s would sit squat on top of a barrel, people huddled around it.

Go was useful in another way as the two young men left Ampex to eventually launch their video game venture: When the local authorities told Bushnell and Dabney that a roofing contractor had already claimed the nerd-friendly sobriquet Sygyzy, they used a term from Go that was equivalent to chess’s “check” for their newly incorporated company: アタリ. Anglicized, that spells Atari.

After Bushnell and Dabney left Ampex, many of their colleagues thought they were crazy. “I felt kind of sorry for Nolan and Ted,” says engineer Al Alcorn, who would shortly join them. “They were quitting a good career at Ampex to go off and do this strange thing. That was the conventional wisdom: Where did these guys go wrong?”

Back in the early 1970s, arcade games didn't pay the bills, but servicing pinball machines — battered and bruised from being tilted and slammed by overzealous and over-served bar patrons — did. The potential was there for games to pay their way, though, and Bushnell saw it. Computer Space had been released in cooperation with Nutting Associates, a manufacturing company, in 1971. This time Bushnell wanted to go at it alone, without answering to someone else. So using the profits from Computer Space, he hired Alcorn as chief engineer for $1,000 a month (less than Alcorn was making at his previous job) and 10% of the company’s stock in May 1972.

Alcorn, a Berkeley grad, was pretty talented at computer science and electrical engineering. At the time, both disciplines involved working with relatively large, clunky machinery and required the patience of a saint as the machines calculated their commands and processed messages across room-sized components. Alcorn had been hired by Ampex through Berkeley’s work-study program in 1968 as an engineer and put educational theory into industrial practice.

“I’d been fixing televisions in a repair shop since junior high,” he explains to me at 10 a.m. on a Monday from his cluttered home office in Palo Alto, California. In fact, it paid his way through college, which he completed while working for Ampex, on and off, through to 1972. But he had no experience with game design, and he was taking a risk on Atari. “We were thinly funded,” Alcorn says — the venture capital firms such as Sequoia Capital that would eventually transform Silicon Valley were in their embryonic stages in the early '70s, not that bar games would have been considered a sound investment. “Banks wouldn’t talk to us. I did it because I was young, unmarried, and reckless — what the hell. I figured it’d cave in a year or two anyway and I’d go back to Ampex.”

"There was a race to the bank to make sure yours was the first paycheck that cleared,” says Steve Bristow, who turned down offers from big companies like IBM and General Electric to join Atari.

Meanwhile, the first TV-based home console, the Magnavox Odyssey, designed by gaming-industry forefather Ralph Baer, was being released. The Odyssey was demonstrated in Burlingame, California, on May 24, 1972. “It turned out that Al started at Atari almost exactly the same day I went up to see the Magnavox game,” says Bushnell. Around the same time, Baer was at Tavern on the Green in Central Park, sitting amongst the 30 or so East Coast retailers to whom his employers were trying to sell his creation. Beaming with pride, Baer could barely sit still. “The entire Magnavox product line for 1972 was displayed there,” he explains. “That included the Odyssey game, which was the hit of the show.” One of the games on the Magnavox console was a version of tennis.

“I thought the game was kind of crappy,” Bushnell says. Yet people were lining up to play it, “and they were kind of having some fun. I thought, If they can have fun with this shite” — Bushnell breaks off into a hearty laugh — “if it can be turned into a real game, that’d be great.” On the drive back from the demonstration, “I got thinking of ways it could be improved.”

Bushnell believed that a game similar to the Magnavox Odyssey tennis title could aptly fulfill a contract with Bally Manufacturing Corporation, which paid Atari $4,000 a month for six months to develop an arcade racing game and a pinball machine. He had a plan: Dabney would handle the creation of the pinball machine for Bally; Alcorn would re-create the tennis game for arcades. All the while the three would regularly grab lunch at a Cupertino diner about a 15-minute drive away from their office at 2962 Scott Boulevard in Santa Clara. “The office was tiny,” Alcorn says, “about 1,000 or 2,000 square feet. We would go into our back room and play a pinball machine — the Bally Fireball — for inspiration.”

Alcorn completed a version of Ralph Baer’s tennis game for home consoles three months later. It saw two bats at either end of the screen hitting a ball from one to the other. Behind the TV screen was a series of around 75 transistor-transistor logic circuits (TTL ICs) that controlled the on-screen components: the two paddles, the ball, and the score counter above the play area. It didn’t need complicated instructions; in fact, the sole in-game instruction to the player was a wry one etched onto the faceplate of the arcade cabinet: “Avoid missing ball for high score.”

“Nolan didn't like the game at all,” Dabney says. “He wanted a driving game, but Al and I liked it so much, especially after Al added some sound. Nolan kept complaining, but we said, ‘No, this is a good game.’”

The original Pong console. Courtesy of Al Alcorn

Alcorn headed out to the local Walgreens, picked up a $75 black-and-white television set, hid the Hitachi logo inside a rudimentary orange casing, which housed the logic circuits and a coin box made from an upturned sawed-off plastic milk jug, and dragged it into the corner of Andy Capp's, next to the pinball machines, the jukebox, and the Computer Space machine. “There were seven or eight machines in the back of the bar,” Alcorn says. "Andy Capp’s was one of our favorite places because we knew the owner, and we trusted him. If something went wrong, we knew he’d call us.” It was September 1972.

The Atari designers and engineers decided to linger for a while. “It was really interesting,” Bushnell says. “You put it in place and stand back and watch people play it.” What they saw was encouraging, but not extraordinary. “We watched for a couple of hours, drank a couple of beers, then went home.” Bushnell was catching a flight to Chicago the next day, a portable version of Pong in an aluminum case under his arm.

Within a few days, Bill Gattis, who ran the bar, was on the phone to Atari. “The machine had stopped working; I was told to go fix it,” Alcorn explains. ”I stopped over on my way home from work, and much to my surprise, the coin box was overflowing, gushing with quarters.”

“It’s weird,” Gattis told Alcorn as he counted the impressive bounty. “I’ve got guys at my doorstep at 10 a.m. when the place opens. They’re not drunks. They come in, play the Pong game, and don’t buy any beer.” Alcorn listened, and swapped out the milk jug for something a little bigger — a bread pan.

“Up until that point I was expecting to turn up to work one day and there’d be a padlock on the door,” Alcorn admits. “It was sheer luck that the simplest game you could think of was what the market wanted.” Today, people talk about "social" gaming, but Pong was truly social gaming. There were no personal computers — and certainly no Nintendo Wii Us, no Xboxes, and no FarmVille. To play meant leaving your house and going to a bar and actually interacting with people.

“You had to play against someone,” says semi-official Atari archivist Curt Vendel, whose online Atari History Museum has carefully salvaged machines, documents, and memories of the company. “It made for a great icebreaker at bars, for people to meet one another.”

But Baer, the inventor of the Odyssey, is to this day ambivalent about his competitor. “Mr. B. didn’t ‘invent’ anything,” Baer, now 90, told me via e-mail, “but he started a whole industry, the arcade video game industry. Give the man credit for that achievement. He just simply didn’t invent anything.”

Two thousand miles away in Chicago, Bushnell had just come out of a meeting where he tried to convince Bally to take Pong instead of the contracted racing game. They said no, and eventually canceled the contract. He called the Atari office to tell them about the outcome of the meeting and instead heard the incredible story of the overflowing milk jug: “On the trip back I realized it had probably been a good thing Bally said no.”

“I vividly remember a meeting at Andy Capp’s when Nolan had returned from Chicago,” Alcorn says. “He told me what had gone on there, and I told him about what Bill Gattis had said. He said we wanted to get into manufacturing, and Ted said, ‘Nah,’ and I said, ‘Nah, I don’t want to be a manufacturer.’ It was two against one. And Nolan won. Next thing you know, we’re a manufacturer.”

Except that they weren't, not technically. “It was really, really hectic,” recalls Dabney. “I used my own money to buy 50 TV sets from a distributor in San Francisco and called a manufacturer and said, 'I need 50 cabinets, but I don't know if I'm ever going to be able to pay you.’”

After they quickly cobbled together the first run of 12 arcade units, about 6 feet tall and in the same yellowy-orange color as the prototype’s casing, they placed them in locations around Southern California on Nov. 29, 1972. “We bought a flatbed truck to deliver the machines,” Alcorn says. "It was used, and wasn’t in the best shape, and Ted drove it down. We didn’t hear from him. We thought he’d stolen the truck and hightailed it to Mexico. It turns out the truck had flat tires and he’d been stranded.”

As Atari delivered those first arcade games to places they had previously visited to service pinball machines, patrons were still turning up to Andy Capp’s specifically to play Pong. They would wait in line outside the bar before it opened at 10 a.m. Now there were 12 other locations where they could play Pong. The game spread and grew.

From that first run of 12, Atari eventually ramped up production. Dabney used a saber saw to bust down a connecting wall that allowed the company to take over an adjacent office. When they took an order for 300 cabinets, even the newly enlarged building wasn't big enough — so they moved into an old roller rink. By March 1973, Atari had shipped out 8,000 cabinets that drew in drunks and their petty change. Dabney decided they should charge distributors $936 for each machine, a figure he arrived at with typical precision: “I looked out the window and saw the number 936 on a license plate.”

Atari's Nolan Bushnell in 1974. Tony Korody/Sygma/Corbis

It's difficult to overstate how big Pong became, and how quickly. Atari sold $3.2 million worth of cabinets by the end of 1974, two years after it first took its place in Andy Capp’s Tavern, and then produced Space Race and Tank (created by Bristow) to join its ranks. The company was profiled in breathless terms for porn rag Oui magazine’s September 1974 issue. (“If profitability were water,” writes Robert Wieder, who spent time at the company’s headquarters for the piece, “Atari could hold the Sixth Fleet.”) And in 1975, Al Alcorn asked a 20-year-old college dropout from San Francisco who had just returned from a sabbatical in India to design a new game called Breakout, which became one of Atari’s most enduring hits. That guy’s name was Steve Jobs, and he asked his fellow long-haired dropout pal from Hewlett-Packard, five years his senior, to come in and help him out. His name was Steve Wozniak.

The next year, Warner Communications, which merged with Time Inc. in 1990, bought Atari for $28 million, netting Bushnell $15 million. Dabney, however, was increasingly phased out of the proceedings. “I wasn't involved in running the company at all,” he says. “I was running the shop. Nolan realized he didn't need me anymore. But I really didn't care — money didn't mean that much to me; my belly was full. So I sold out to him.”

Around the same time, Sears Roebuck’s sporting goods buyer, Tom Quinn, came knocking, asking for a home-console version — and gave Atari money to double the production run when they decided the 75,000 units they could muster just weren't going to be enough.

Other developers, big and small, saw the runaway success of the game and brought out their own clones to take a slice of Pong's pie. Allied Leisure released around 20,000 cabinets of Paddle Battle in March 1973. Nutting Associates, the company Bushnell and Dabney had worked with to release Computer Space, ended up releasing Computer Space Ball, which was strikingly similar to Pong. There was Paddle-Ball from Williams Electronics, and Rally from For-Play. Midway Manufacturing, then a pinball machine company, dipped their toe into the waters of arcade games with Winner in 1973.

These manufacturers doubled down on their advantage: Not only could they piggyback on Pong's PR success, they did not have to take into account the cost of developing the game: They could simply lift its internal machinery wholesale. “They say imitation is the sincerest form of flattery,” Alcorn says, chuckling. Though he’s quick to add, “I’d rather have the money.”

Even with companies creating Pong-alikes, Atari thrived. Bushnell estimates that in the early ’70s, the official Atari cabinets made $40 per day — which meant that at the end of each week (and after the venue had taken their 50% cut), Steve Bristow, another Ampex alum who followed Bushnell, Dabney, and Alcorn to Atari, had to schlep five pounds of quarters to his car when he collected each machine's earnings. By the end of the collection route, Bristow could be carrying 30-pound bags over his shoulder.

“I’d go around collecting quarters and fixing games,” he explains. “Some of the locations were not in the primest areas. We couldn’t get a concealed-weapons permit, but I had worked a few years before as a roofer, so I had a roofing hatchet. I’d be walking down the streets at midnight, carrying bags of money. My wife would be carrying one bag in one hand, the hatchet in the other.” He pauses. “Nobody bothered us.”

In 1976, Atari took a monetary hit, settling a lawsuit out of court in Chicago with Magnavox. (Alcorn remembers the settlement being $300,000; Bushnell thinks Atari coughed up $500,000; Curt Vendel, who had seen documentation surrounding the suit, notes that $1.5 million in all was paid in installments up to 1983.) The suit concerned a patent held by Baer and Magnavox regarding interaction between machine-controlled and player-controlled elements on the screen, a basic foundation of design “that covered just about every game developed between 1971 and the mid-1980s,” Baer says. He was clear about the lineage of Atari’s product: He told the Computer History Museum in 2006 that “Pong is simply a knockoff of the Odyssey Ping-Pong game,” and that Bushnell “knew he was going to lose and decided to come under contract” with Magnavox as a licensee.

Yet Baer ultimately is sanguine about the similarities between his Magnavox game and Pong: “That’s the business,” he says. “Most inventions are based on some prior history. Al Alcorn knew absolutely nothing about the existence of the Odyssey game — he deserves the major credit for getting Atari started successfully.”

For his part, Bushnell remains certain that they would have won the case, but settling out of court was the less painful solution. “I always thought of things in a strategic sense,” he says. “They offered me such a cheap settlement that it was less than what it’d have cost me to fight it. And I liked the idea of them going out and hassling everyone else.” (Magnavox took other game companies to court and regularly won.) “With me paid up, it felt like a win-win, and it was really a ridiculous amount of money.”

Atari earned more than a billion dollars in 1981, and helped Warner revenues reach $3.2 billion. By this time, Bushnell was gone — a disagreement with management over the pricing of Atari’s 2600 home console was the final straw, but due to a contract clause stating that he’d get no money if he quit, he merely stopped doing any work until he was eventually fired, and then collected $100,000 a year for four years.

“Atari turned out to not be a very successful company,” Dabney says. “Nolan was actually a pretty rotten businessman, but once other people took hold of it, it took off.”

A video game industry crash was just around the corner, but Atari was riding high — and it was fuelled by two dashes and a dot. All told, 100,000 Pong machines were installed into pizza parlors, bars, and bowling alleys — though only a third of those were officially licensed games manufactured by Atari, according to estimates.

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And while the game is ubiquitous in culture low and high — Frank Black wrote a song about it, and the Museum of Modern Art in New York wants to add it to their collection next year — it ultimately means more than any pop reference can hold. “The main impact of Pong on contemporary culture is that it had an impact on contemporary culture,” says Stanford’s Henry Lowood. “Before this, connecting games and culture wasn't even a question on anyone’s mind.”

To celebrate the game’s 40th anniversary, Atari has licensed a commemorative title, Pong World, to zGames in Houston, winners of a $50,000 Pong Indie Developer Challenge. The game will be available in the app store — although playing on your iPad or iPhone isn't the same as a hulking, whirring, beeping arcade machine. Baer owns an iPad, but doesn’t have the time to play games, even if they “keep challenging me to waste some time.”

The games industry has come a long way from Nolan Bushnell, Ted Dabney, and Al Alcorn crammed into a tiny office in Santa Clara, California. “We worked any hours we could,” explains Alcorn. “We chipped in. It was a start-up company. You swept the floors and everything.” That homespun DIY approach lives on today in the development of tablet and mobile apps.

“Things seem to be coming full circle,” says Darran Jones. “Games are getting made with bigger and bigger budgets…but conversely you’ve got indie developers and Kickstarter,” both contributing to the huge number of games produced on a constant cycle each year for our delectation.

If you told the patrons of Andy Capp's Tavern back in 1972 that people would be playing games on phones, they'd have cut you off and put you in a taxi. But then again, before Nov. 29, 1972, they didn't really know they liked arcade games, either. Forty years and hundreds of billions of dollars on, look what happened to that idea

“Anyone could play,” Alcorn says. “You didn’t have to know physics or space flight or anything. Pong was designed so you could participate in athletics while maintaining a firm grip on a can of beer. You could literally pick up a girl, drink a beer, and play a video game at the same time. It was wonderful.”